Twenty-six percent of employers offering health benefits could be subject to the Affordable Care Act’s tax on high-cost health plans, also known as the “Cadillac plan” tax, in 2018 unless they make changes to their plans, according to a new analysis.

A report from the Kaiser Family Foundation estimates that the share of employers potentially affected by the tax could grow significantly over time—to 30 percent in 2023 and 42 percent in 2028 — if their plans remain unchanged and health benefit costs increase at expected rates.

However, the report acknowledges it is likely that many employers will revise their plans to avoid the tax, at least initially, through modifications that could include reducing options for employees or shifting costs to workers in the form of higher deductibles and other patient cost sharing.

The ACA’s high-cost plan tax, which takes effect in 2018, aims to raise revenue to fund coverage expansions under the health care law and to help contain health spending. It taxes plans at 40 percent of each employee’s health benefits that exceed certain cost thresholds: In the first year, the thresholds are $10,200 for self-only coverage and $27,500 for other than self-only coverage. The thresholds increase annually with inflation.

Using data from the forthcoming 2015 Kaiser/HRET Employer Health Benefits Survey, the Foundation’s new analysis estimates the percentage of employers who offer one or more plans that would reach Cadillac tax thresholds for some employees and who would face a choice between paying the tax or restructuring their benefits to avoid it. The analysis provides projections for 2018, 2023 and 2028, using different scenarios, including with and without flexible spending accounts; small vs. large employers; and with various growth rates in premiums. The estimates assume the health plans remain unchanged.

In addition to projections, the new analysis also explains how the high-cost plan tax works and describes its implications for how employers structure and administer their health benefits.

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